The real key to retail growth is last mile delivery

In the 1950s, suburban moms with bouffant hairdos, horn-rimmed glasses and long dresses phoned their local grocer, who took their order in the morning and sent over a high school kid on a bicycle later that afternoon. The modern idea of what has come to be known as “last mile delivery” to the consumer’s home is really just a new twist on something very old and traditional. Instead of phoning it in, the orders now come in through an app; and instead of a part-time delivery person who works at the store, deliveries come through a network of gig economy workers that are vastly more efficient, digital and infinitely more scalable.

“The phenomenal growth of ecommerce, along with a consumer expectation of low-cost and rapid delivery, has forced retailers and other businesses to look at new options for solving the last-mile challenge,” said Tom Fiorita, CEO and founder of last-mile, multi-modal delivery innovator Point Pickup. Retailers are feeling pressure from two different directions: From major retailers like Amazon and Walmart who are fundamentally changing the marketplace by rolling out last-mile innovations and ecommerce options, and from consumers, who are increasingly demanding that every retailer they do business with offer those options. Fast, low-cost delivery to the home is no longer just an option – it’s essential to survival. But for retailers today, the kid with a big basket on his Schwinn just isn’t going to cut it.

“Retailers need two things,” said Fiorita. “They need a good online presence, and they need great distribution.” Fiorita suggests that the solution to end-to-end, same-day delivery throughout the entire supply chain doesn’t mean setting up a platform to find the closest delivery driver, but rather, the correct one. “The challenge in the industry is that there is a very disorganized and fragmented delivery network in the United States. This universe includes thousands of DOT-registered vehicles that are owned by people who own less than six vehicles, along with individual couriers and gig workers. They are fragmented and unwired. What we’re doing is organizing and standardizing it.”

Overcoming this challenge requires going beyond the single-modal approach of gig-based courier platforms that simply match businesses with the closest driver (the Uber model). Real transparency along the entire supply chain is essential, and retailers need to have access to a fully streamlined platform capable of handling everything from larger middle-mile warehouse-to-store deliveries, to the direct-to-consumer shipments.

The immediate problem faced by larger retailers looking to organize same-day and last-mile delivery across hundreds of stores is precisely that level of disorganization. With thousands of independent, small transportation vendors with no scalability, it becomes impossible for a single large retailer to sign enough contracts with and manage their independent drivers while trying to build a network capable of shipping any item of any size, including specialized or regulated goods. Fiorita cites four distinct problems faced by retailers: First, the insurance and liability issue, and second, managing potentially thousands of individual providers. Third, there needs to be a standardized transaction management system – again not possible when relying on an unorganized network of thousands of independent couriers. And finally, there has to be national scalability.

What do retail customers want?

More to the point, retailers need to ask what do millennial customers want. According to PwC’s Global Consumer Insights Survey, they want fast, same-day delivery. E-retailers like Amazon have raised shoppers’ expectations. While timely delivery in the 1950s model was largely dependent on whether Jimmy had too much homework after school to make his rounds, retailers and the logistics companies that serve them face a very different set of challenges, and the PwC study notes that those logistics firms will need to focus on “digital fitness,” along with cost-efficiency, asset productivity and innovation, and then bringing it to scale.

Those consumers place a high priority on being able to order through an app and then getting timely delivery, so much so that 40 percent of online shoppers are willing to pay extra for same-day delivery, and 25 percent would pay more to get packages within a one- or two-hour window of their choosing.

What do retailers need?

Retailers are beginning to rethink delivery as they face increased pressure to meet consumer expectations, and pressure from competitors like Amazon and Walmart with extensive last-mile delivery models. Other major retailers are building out their own last-mile models: Ikea for example, acquired gig economy site TaskRabbit, giving them not only a universe of gig delivery workers but also furniture-assemblers.

While some retailers look towards an Uber model for last-mile delivery, this does not solve the multi-category nature of retail. While Uber’s model selects the closest provider and works by flooding a local market with as much capacity as possible, it lacks a precision matching system – and in the case of matching drivers and riders, precision may not be needed. “With Uber, humans are all the same,” said Fiorita. “It doesn’t matter if they pick you up or you’re going to the airport, the cargo is the same. In the delivery business it’s a lot different, the needs are very complicated, and the packages don’t walk and talk.”

Retailers need more than just capacity, they need precision capacity. A retailer may for example, need a two-person delivery team for some shipments, they may need drivers with a HIPAA license, or a TSA license for airport pickup. There are dozens of different complicating factors, and that means that in the world of last-mile delivery, closest is not always best.

“We’re a multi-modal, multi-sector and multi-category capacity platform,” said Fiorita, describing the model of Point Pickup. “We aggregate all capacity for same-day delivery. The majority of delivery capacity is still a highly fragmented, unwired capacity network. We organize it and standardize it.”

Solving the last-mile challenge

Solving the last-mile challenge starts by looking at the middle mile. “By eliminating much of the cumbersome middle layer and adding a new level of precision to what’s left, Point Pickup is able to transform what has always been a highly fragmented approach with a smart platform, capable of precisely matching any delivery criteria with our diverse driver network made up of everyday people, larger trucking vendors, and independent contractors” said Fiorita, “creating a smart and direct system that is capable of rapid delivery by eliminating the more cumbersome elements of middle-mile layers.”

Transparency comes with using a single platform for the entire delivery supply chain. Scalability is crucial, especially for larger retailers in multiple metro and secondary markets. “By integrating this vast network of drivers with its intelligent matching technology, Point Pickup provides reliable, repeatable and scalable service with vehicles ranging from small sedans, to larger delivery trucks.”

Not to be outdone by retail giant Amazon, many US retailers are pushing the envelope and have incorporated Point Pickup as part of their strategy to have online grocery and general merchandise delivery service available, whether they have thousands of stores or just one. Such smart platforms are on the forefront of the tremendous shift underway in retail. Those platforms enable a combination of precision matching with the right driver and right vehicle for each delivery, same-day availability throughout the entire supply chain and down to the consumer level, and a preferred driver program. This gives the retailer more control over directing recurring business to their most reliable drivers with every type of vehicle from small sedans to large trucks.

The future of retail is clear, and it’s in providing this last-mile delivery. “They have to build a holistic ecosystem around ecommerce,” said Fiorita. “Analysts believe that same-day delivery will reach 35 to 40 percent of consumers, but even 25 percent of the $5 trillion US retail market is massive.”

Dan Blacharski is a thought leader, advisor and industry observer, and editor-in-chief of NewsOrg.Org. He has been widely published on subjects relating to customer-facing technology, cloud computing, and crowdsourcing. He lives in South Bend, Indiana, with his wife Charoenkwan, a noted Thai author and journalist, and their dog "Ling Ba."

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[03/28/2019]
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